China is the winner of the US-Iran war, former top US diplomat says

China has emerged as the winner of the US-Iran war — a conflict whose end-of-war negotiations have stalled — some analysts say. Beijing demonstrated its government's crisis-management capabilities in both energy procurement and stockpiling, minimizing damage to its own industries while cementing its role as the "world's factory" at a time when global companies had been considering shifting production to Southeast Asia. A surge in exports of solar panels, batteries and electric vehicles, driven by growing interest in clean energy, has further contributed to China's gains.

Kurt Campbell, former US deputy secretary of state and co-founder of The Asia Group (TAG), said in an interview with the Nikkei on Tuesday that China is the winner of the Iran war and that East Asia, including Japan, has suffered the most.

"China is one of the winners of this US-Iran conflict, having demonstrated capacity in both energy procurement and stockpiling," Campbell said. "It is clear that China is the country most successfully navigating the storm of global economic destabilization."

The war's impact has been felt largely through the effective blockade of the Strait of Hormuz, which has disrupted global supply chains — from energy to a wide range of goods — on an unprecedented scale. China has been credited with responding effectively to the crisis and absorbing the "balloon effect" of demand shifting toward clean energy, further strengthening its industrial competitiveness.

In a report released Sunday (local time), TAG said China "was able to avoid the worst impacts thanks to its oil and gas reserves and clean energy supply," adding that this "is reinforcing China's position as a competitive location for manufacturing."

TAG said the Indo-Pacific region has been hit hardest by the war, while the Chinese government used price controls, export restrictions, subsidies and a managed monetary policy to absorb the economic shock. China tapped its oil and gas reserves and imposed export restrictions and quotas on refineries to avert an energy crisis — drawing down its own stockpiles to the point where the country's oil imports fell more than 30 percent year-on-year last month.

The war has also shifted attention away from oil-based energy toward alternatives, spurring a jump in exports of solar panels, batteries and electric vehicles — industries dominated by China — which analysts cite as another factor behind China's gains.

Meanwhile, Southeast Asia's vulnerability to the energy crisis has been laid bare, and some analysts say global companies that had been moving production bases from China to Southeast Asia are likely to slow those plans. The crisis has reinforced the view that Southeast Asia cannot serve as a viable alternative to China, and that China will continue to hold its position as the world's factory.

Campbell warned that Asia, including Japan, will feel the war's aftereffects for longer. Asia has sourced 80 percent of its oil and 90 percent of its natural gas through the Strait of Hormuz, and the global supply chains dependent on that passage have proven far more extensive than anticipated. The conflict has caused supply disruptions in naphtha — used to make plastics and chemicals — as well as helium used in semiconductor factories and MRI machines, copper, nickel, and sulfur needed to smelt critical minerals for electric vehicle batteries and electrical systems. "Compared with past crises such as COVID-19, the inflationary aftereffects will linger longer than expected, and restoring energy stockpiles to pre-war levels will require greater resilience," he said.

Campbell also said the war will have a significant impact on Asia's security landscape. "The United States had, over many years, transferred military capabilities — missiles, fighter jets, troops — to the Indo-Pacific, but this conflict has pulled them back to the Middle East," he said. "It will not be easy to return them to the Indo-Pacific immediately, and this will affect Asia's security landscape over the long term." He added that prolonged inflation and the US military "vacuum" would compound instability across Asia.